Tesla Fires Hundreds of Workers, Amid a Shortfall in Model 3 Production

News sources reported today that Tesla fired hundreds of workers on Friday. The dismissals come as the company is falling behind on production targets for the Tesla Model 3, its all-important mass-market affordable long-range small electric car.

Tesla did not disclose how many employees were fired. Estimates range between about 400 and 1,200 employees. A Tesla spokesman said the dismissals were mostly in administrative and sales positions—rather than for engineering and manufacturing positions that could affect production output and vehicle quality. Also, the company said the employees were let go due to low performance in the aftermath of an annual employee review.

The San Jose Mercury News, which broke the story, said that Juan Maldonado, a production worker who was fired, indicated that about 60 other factory workers in his section were dismissed.

The company fell short of its production target of 1,500 Model 3s in the third quarter of 2017. The company has reportedly produced only about 260 Model 3 cars so far. Tesla was scheduled to produce as many as 20,000 vehicles per month by the end of this year. That’s only the beginning of Tesla’s ambitious production ramp over the next year. Elon Musk, Tesla’s chief executive, said the company was aiming to build 500,000 cars per year by 2018.

Tesla previously indicated that the reason for the delay was a manufacturing bottleneck in the supply chain. Colin Rusch, an industry analyst, said the delayed ramp in production is “due to a small number of suppliers failing to deliver on time.” Fortune also reported earlier this month that the production line was not yet fully automated—causing workers to assemble Model 3 vehicle by hand.

Other analysts believe that openly pro-union workers were targeted in the firings. Factory workers are reportedly unhappy about difficult work conditions and wages below industry standards. Tesla has a hearing before the National Labor Relations Board in November related to workers being harassed for distributing union literature.

Regardless of the cause, Chuck Jones, reporting in Fortune, wrote, “Large firings are typically not a good sign for a company and especially for one that is trying to grow quickly.” Employees told the Mercury-News that they received “little or no warning” before the dismissals and that the firings lead to “lowered morale through many departments.”

Michael Harley, managing editor at Kelley Blue Book and Autotrader, suggested the dismissals were an effort to improve vehicle production. “It’s no secret that Tesla’s Model 3 development and ramp-up for production has been derailed,” he told the Mercury-News. “A major change in staff…is an indication that there is an upper-level movement to put the train back on the tracks.” Tesla currently has more than 33,000 employees.

Tesla encountered missed deadlines and production delays for its previous models, only to turn things around and produce award-winning vehicles credited for pushing the entire auto industry toward electric vehicles.

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